S&P 500: Top Investors Reveal 7 High Dividend Stocks You Need

High-dividend ETFs are about the only diversified funds this year. And most of them agree on the S&P 500 stocks you should own.




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Seven high-dividend S&P 500 stocks – inclusive AbbVie (ABBV), Exxon Mobil (XOM) and Phillip Morris (PM) — are in the top 10 of at least half of the top five diversified ETFs this year, according to an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and ETF.com.

The popularity of S&P 500 dividends and high yield dividend ETFs has driven much of the market action this year. And these are the kinds of stocks that investors — and leading ETFs — focus on.

“The superlative of dividend payers in 2022 is no fluke,” said Morningstar Indexes strategist Dan Lefkovitz. dividend shares dramatically outperformed growth shares.”

Looking at dividend ETFs

The dominance of dividend-paying ETFs is impossible to ignore. Nine of the top 10 diversified ETFs this year are all focused on dividends, says Morningstar Direct. They are also among the few ETFs to rise this year. And that’s an impressive performance in a year to date that has seen the S&P 500 lose 12.9%.

High-dividend ETFs capture investors’ struggles to generate income without relying solely on bond ETFs, said Todd Rosenbluth, chief research officer at VettaFi. Investors know that bond ETFs fall in price when the Federal Reserve raises short-term interest rates. Dividend ETFs offer another way.

“With rising interest rates causing bond funds to fall in value, investors have been looking for alternative ways to generate income,” said Rosenbluth. “Dividend-paying stocks provide a steady stream of cash for shareholders while offering upside through equity appreciation.”

Check out the best performing diversified ETF so far this year: Invesco S&P Ultra Dividend Revenue (RDIV). The ETF has achieved a return of 9.3%. The $886 million ETF does this by owning 60 of the highest-yielding stocks relative to their earnings. Exxon Mobil and Chevron (CVX) are two of the ETF’s 10 largest holdings that are held in common with other top diversified funds. Chevron is almost 4.9% of the ETF portfolio, while Exxon Mobil is 4.8%.

And it’s easy to understand their appeal. Chevron shares are up nearly 60% this year on top of a 3.1% dividend yield. And then there’s Exxon Mobil, which is up nearly 86% on top of a 3.3% dividend. Such gains are not missed by most dividend ETFs.

Dividend ETFs Find favorite S&P 500 stocks

Exxon Mobil is almost a must-have dividend ETF. It is also a top 10 holding among three of the other top performing diversified ETFs, as it is now the number 9 most valuable stock in the SPDR S&P 500 Trust (SPY). Those ETFs include WisdomTree US High Dividend (DHS), iShares Core High Dividend (HDV), and First Trust Morningstar Dividend Leaders (FDL).

Chevron also appears in the top 10 of two other dividend ETFs: WisdomTree US High Dividend and iShares Core High Dividend. And that’s despite being only 15th on the S&P 500.

However, energy is not the only favorite among dividend ETFs. Philip Morris is just as famous for its 5.2% dividend yield as its family of cigarette products like Marlboro. It is held by four of the top five diversified ETFs. And then there’s healthcare company AbbVie, which is heavily owned by three of the top funds and has a dividend yield of 3.8%.

However, don’t assume that popularity and a big dividend will translate into profit. Verizon (VZ) is also one of the top holdings of four of the top five diversified funds, thanks to its 6.8% dividend yield. But it’s down 25% this year.

Don’t expect ETF investors to lose their appetite for dividend anytime soon, says Rosenbluth. “We expect investors to turn to dividend ETFs for capital growth potential rather than to support income needs in 2023 as the Federal Reserve slows its rate hike program and bond funds offer a more competitive income alternative,” he said.

Must-own dividend stocks

Top 10 holdings from most of the top five performing diversified ETFs this year

Company Symbol Yield YTD ch.
Exxon Mobil (XOM) 3.3% 86.5%
Chevron (CVX) 3.1 58.9
AbbVie (ABBV) 3.8 17.9
International business machines (IBM) 4.5 11.5
Phillip Morris International (P.M) 5.2 2.1
Altria Group (MO) 8.4 -4.7
Verizon (VZ) 6.8 -24.7
Sources: S&P Global Market Intelligence, IBD

Follow Matt Krantz on Twitter @mattkrantz

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